So I'm about six weeks into trying to sell my retail store. Had a guy interested, numbers looked good, we were talking LOI. Then his lawyer asked for the lease. Fine, right? Except my lease has this clause buried on page 14 that says if I sell the business without landlord's written consent, it's an automatic default. Not a 'landlord may withhold consent' thing , an event of default. And apparently my lease also says a default triggers a personal guarantee acceleration. My broker didn't catch it, my CPA didn't catch it, I didn't catch it. We're now scrambling. If you're even thinking about picking up the phone to a buyer, go read the default section of your lease first. That's it, that's the post.
Commercial Lease
Check your lease default terms before you make that phone call
Page 14 of a commercial lease is where joy goes to die. Sorry you're dealing with this.
Not to be that guy but how does a broker miss that? Assignment/sale of business is literally the first thing a commercial broker should check. Is this your first time selling?
@BiscuitHound first sale, yes. Broker came recommended by a friend. In fairness he found the buyer fast, but lease review wasnt in his wheelhouse apparently. Lesson learned the hard way.
The personal guarantee acceleration part is the real grenade. Most people think default just means 'landlord can evict.' No — a lot of these lekases make default mean they can demand the entire remaining rent as a lump sum. Read the remedies section too, not just the default definition.
following this. about to list my bakery in spring and now i'm scared to read my own lease
Read it anyway. Scared is cheaper than surprised.
Also worth calling the landlord BEFORE the buyer's lawyer does. If you roll in with 'I want to sell, here's a request for consent,' you're negotiating from a friendlier spot than when their counsel gets a surprise letter. Landlords get prickly about that.
Everything above is right, and I'll addd: read the definition of "transfer" or "assignment" carefully. Some leases define it so broadly that even a 10% change in ownership of your entity counts. I've seen people trip that without selling anything.
Have you actually gottenn a number from the landlord for consent yet? Sometimes they'll want a fee, sometimes they want a bump in rent, sometimes they just want a new guaranty. Would be curious what they're asking.
@orbital_fig nothing formal yet. Had one call. They mentioned a 'processing fee' and wanted to see the buyer's financials. No number on paper. Trying to get that in writing before i promise the buyer anything.
ok update i read mine. page 22. "sale of substantially all assets constitutes assignment requiring prior written consent." so. yeah. glad i found this thread.
One more thing nobody's said — check whether the landlord's consent is required to be 'reasonable' or 'sole and absolute discretion.' Those are two very different phone calls.
Sole and absolute discretion is landlord-speak for 'get your wallet out.' Anyway good luck OP, sounds fixable but expensive.